Venture capital is a form of private equity financing, where investors provide funding to start-up companies and small businesses that exhibit long-term growth potential.
Venture capital generally comes from well off investors, investment banks and business angels. Venture capitalists normally go beyond direct financial investment – by providing expertise, advice and insight into opportunities that might not have been available to the company previously.
Venture capital offers small companies the opportunity to work with experts who invest their time, resources, contacts, knowledge in a company’s strategies.
Venture capitalists focus on the long-term picture rather than the immediate commentary within the business plan. Founders need to be aware that venture capitalists have an expectation of capital gains which are created by “business exits”.
Probably the most important document that the company can prepare is its business plan. The business plan is the initial piece of information that venture capitalists will review, and if it doesn’t compel them to take action, the journey towards venture capital financing from that group of investors can end abruptly.
Founders need to appreciate that a growing company requires funding – even when the company is trading profitably. As companies grow, more of the funds are tied up in assets that are not immediately realisable – inventory, debtors, capital expenditure, engagement of key staff.
If the founders are unable to supply the funding that is required, the alternative is to raise capital from the public. This requires the allocation of shares to those investors who are supplying the funds, which hopefully will enable the founder(s) to realise their vision for the business.
Preparation is vital for a successful capital raising and with most companies will need external assistance. Contact Towers Business Development on 1800 232 088 or email to find out we can help your company become “investment ready”.